Delayed 감사마감 and Difficult Attendance at General Meetings... COVID-19 Impact to Continue in General Meeting Season

Difficulties in Holding Online General Meetings
"No Legal Basis for Online General Meetings, Voting Rights Not Recognized"

On the morning of the 6th of last month, an extraordinary general meeting of shareholders was held at the Korean Air headquarters in Gangseo-gu, Seoul, to amend the articles of incorporation for increasing the total number of issued shares for a paid-in capital increase.

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[Asia Economy Reporter Minwoo Lee] As the regular shareholders' meeting approaches, concerns are rising over disruptions in the settlement and audit work of listed companies due to the continued spread of COVID-19. It is expected to be difficult to conduct quarantine measures and attendance on the day of the shareholders' meeting. Additionally, challenges related to changes in corporate governance regulations such as the Commercial Act are also anticipated.

On the 18th, the Korea Listed Companies Association announced the "Top 5 Key Issues for the 2021 Regular Shareholders' Meeting of Listed Companies," which includes these concerns. The issues were selected based on frequent inquiries received through the "Regular Shareholders' Meeting Helpdesk," operated annually to support the holding of regular shareholders' meetings for companies listed on the Korea Exchange.

First, due to the ongoing spread of COVID-19, there are concerns about disruptions in settlement and audit work. The pandemic has caused delays in settlement and external audits, making it difficult to submit financial statements, audit reports, and business reports within deadlines. For companies with overseas subsidiaries, audits may become impossible to conduct. There are also criticisms that companies face increased burdens due to conflicting demands between complying with government quarantine guidelines and encouraging shareholder attendance to meet quorum requirements for the shareholders' meeting.

Companies must also familiarize themselves with changes brought by the enforcement of the Commercial Act and its Enforcement Decree related to "Enhancing the Substance of Listed Companies' Shareholders' Meetings." Unlike before, business reports and audit reports must be mandatorily attached when notifying and announcing the convocation of the shareholders' meeting. This is to ensure substantive exercise of voting rights. However, posting on the company website one week prior to the meeting can suffice.

Furthermore, to disperse the timing of shareholders' meetings, the record date system has been revised to allow setting the record date after the fiscal year-end. The application of term limits for outside directors to improve corporate governance, and the mandatory separate election of audit committee members have also been enforced. A representative from the Korea Listed Companies Association stated, "Corporate burdens may increase due to amendments to articles of incorporation for record date changes, submission of business reports before the shareholders' meeting, searching for outside director candidates, and responding to separate elections of audit committee members."

Meanwhile, concerns were raised that holding non-face-to-face online shareholders' meetings is difficult under the current Commercial Act. Although holding such meetings is possible, there is no legal basis for exercising voting rights online. A representative from the association explained, "Legislation regarding online attendance, procedural remarks during meetings, and voting rights exercise has not yet been prepared. Without legal recognition of the technical aspects for shareholders, attendance may be invalidated." Currently, a "hybrid online-offline" amendment to the Commercial Act proposed by Assemblyman Byungwook Kim of the Democratic Party is pending in the National Assembly's Legislation and Judiciary Committee.

This content was produced with the assistance of AI translation services.